AUDUSD Technical Analysis – Focus on the Quarterly Australian Consumer Price Index

The AUDUSD currency pair continues to trade within an expanding wedge as the market hesitates in anticipation of new catalysts. What’s next?

Fundamental review

The US dollar regained ground in the latter part of last week, although we do not have a meaningful catalyst for the move. Overall, we remain hesitant as the market waits for something new for the next sustainable trend. Given that “short US dollar” is now the busiest trade, it will take something meaningful to make the market expect more rate cuts than are currently in place.

On the Australian dollar (AUD) side, the focus this week will be on the Australian quarterly inflation report due out on Wednesday. The market is currently pricing in 58 basis points of easing by the end of the year with an 85% chance of a rate cut at the upcoming August meeting. We would likely need much lower than expected data to make the market anticipate more rate cuts than is currently being seen. Higher than expected data could give the Australian dollar a boost in the short term on a more hawkish repricing.

AUDUSD Technical Analysis – Daily Timeframe

On the daily chart, we can see that AUDUSD has again rejected the upper trendline as sellers positioned themselves for a drop to the 0.6350 support level. Buyers will need to break above the upper trendline to continue the rally to the 0.6900 level.

AUDUSD Technical Analysis – 4-Hour Time Frame

On the 4-hour chart, we see that we have a small support area around the 0.6485 level, where the price has been rejected several times in recent weeks. If the price reaches this level, we can expect buyers to step in with some risk below it to position themselves for a rally back towards the upper trendline. Sellers, on the other hand, will look for a breakout to the downside to increase bearish bets towards the next support at 0.6350.

AUDUSD Technical Analysis – 1-Hour Time Frame

On the hourly chart, we can see that we have a small downtrend line defining the bearish momentum in this time frame. From a risk management perspective, sellers will have a better risk-reward ratio around the trendline to position themselves for further declines. Buyers, on the other hand, will be looking for an upward breakout to invalidate the bearish trendline and target a rally back to the upper trendline. The red lines define the average daily range for today.

Upcoming catalysts

Tomorrow we have US jobs and consumer confidence data. On Wednesday we have the Australian quarterly inflation report, US GDP, US Q2 GDP and the FOMC interest rate decision. On Thursday, we will get the US PCE price index, US jobless claims and US employment cost index. Finally, on Friday, we will finish the week with the US NFP report and the US ISM manufacturing PMI.